Contentions

If you heard it once last week, you heard it 100 times. General Motors is alive and Osama bin Laden is dead. That juxtaposition of the federal bailout of the car manufacturer and the killing of the terrorist is supposed to be the argument for President Obama’s re-election. While both are good things, neither tells us much about the administration’s value. It is likely that GM would have survived in one form or another no matter what the president did. Nor, despite the unseemly chest-thumping braggadocio about the bin Laden operation, is it reasonable to assert that it was only possible because Obama was president. Nevertheless, this catch phrase, made popular by Vice President Joe Biden, is an effective campaign slogan. Indeed, the car bailout is thought to be a crucial factor in propping up the president’s poll numbers in key swing states like Ohio and Michigan that may decide the election.

However, for all of the cheering for GM plants done at the Democratic convention, the notion that the company that once dominated the industry has been set back on the path to prosperity by the president may be something of an illusion. Last month, Forbes published a sobering piece on the company’s prospects that should give even the giddiest of Democrats pause. According to Louis Woodhill, the GM revival is all smoke and mirrors:

President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.

Woodhill points out that the value of GM stock has crashed since it went public in November 2010. That leaves the federal government, which owns about 26 percent of the company, sitting on what he estimates is a loss of $16.4 billion. He predicts that the president will probably ride the decline of the company’s stock down to zero as its house of cards inevitably collapses.

Just as important, Woodhill asserts that the failure of the company’s cars to make headway against its rivals means that its decline is an inevitable result of failure rather than merely the vagaries of stock speculation. With Chevy’s Malibu failing to stock up against comparable models from Ford (the U.S. company that wasn’t bailed out by Obama), Volkswagen, Honda, Toyota, Nissan and Hyundai, he thinks there’s little reason to believe that anyone will be bragging about GM’s Lazarus act in a year or two. He believes that if Obama is re-elected, it is a certainty that the company will be back begging for help and that the president will be forced to oblige with another bailout.

If he’s right, rather than the bailout being a triumph for his administration, Obama’s bouquet to the United Auto Workers will turn out to be a cautionary tale about the folly of government intervention in the market.

A year from now, Osama bin Laden will still be dead, meaning that Barack Obama can go on bragging about the one bright spot in his career as commander-in-chief until the end of time. But if Woodhill is right, we will look back on the GM bailout as just another failed government boondoggle.